Lakeside Beef Slaughter Increase in June

[farmers_son]

Lakeside beef slaughter increase to start in June
by Kevin Hursh

Tyson Foods, which owns Lakeside Packers at Brooks, Alberta, says the plant will begin increasing its beef slaughter capacity in mid-June. This is the result of a $17 million plant expansion project underway since last fall.

John Tyson, chairman and chief operating officer of Tyson Foods visited the Lakeside plant on Wednesday. “Our investment in this project will help address the backlog of cattle created by the continued closure of the U.S. border,” said Tyson.

The capital investment in the plant has involved expanding the beef carcass coolers and streamlining parts of the beef slaughter operation. The changes will increase slaughter capacity from about 3,800 cattle per day to 4,700. While some aspects of the project will not be finished until fall, enough have been finished that plant officials expect to gradually begin ramping up production next month.

The company says the specific timing will be driven by the ability to hire additional workers. The expansion is expected to create as many as 300 additional jobs, eventually increasing the workforce to 2,700.

Tyson is running its U.S. beef plants on reduced levels of production, due in part to the continued U.S. ban on Canadian cattle. Tyson continues to support efforts to reopen the border.

[greybeard]

Anybody think that this will see an increase in dollars in our pockets ????

[farmers_son]

No it will not.

[farmers_son]

But the average urban resident that sees the hype about the increased slaughter capacity will likely think that increased capacity will mean increased return to the cattle producer.

[wd40]

We are servants to our own created destiney.

[farmers_son]

Media hype is just that. Only increased competition will increase returns to producers. Expansion by Lakeside or Cargill either by increased capacity or by purchasing capacity as Cargill did in Ontario with Better Beef works to decrease competition, not increase it. All Canadians, not just producers, should be concerned about the lack of competiton in the beef industry.

[farmers_son]

WD40. I think it is an oversimplification to say that we have created our own destiny. We cannot underestimate the extent that government has shaped our industry. Things could have been different.

[kpb]

farmers_son, I believe you are right about the government helping to form our destiny. But I do think it is clear that our industry is dysfunctional, with or without BSE. It is Economics 101 that in a commodity business, the price the buyer will pay is based upon the price that the lowest-cost producer will accept.

This is true in commodity businesses that have high barriers to entrance such as, say, mining or forestry where there are hugh infrastructure and start-up costs, etc. It is not true in the cow-calf business where everyone with a quarter section can own 30 cows.

Because there is not a high barrier to entrance in our business, the average price that producers will receive will never be enough to cover the cost of producting that calf. This has to be true because a large number of cow-calf producers ultimately do not care if their animals make money or not--they have an interest in making money but their main income source comes from somewhere else so making money on cows is not a matter of survival.

Basic economics again states that if your are in an industry that is not driven by profit (cow-calf production) then the average price received for your commodity will not be based on the lowest cost of production but rather on the largest loss that the average producer will assume without leaving the business. In other words if producers will accept a yearly loss of $100 per calf then that price, whatever it may be, will be what calves go for.

Some have said on this board that they will become the lowest-cost producers or produce very special calves to combat this untenable situation. However these solutions will ultimately not work because the economic model is based upon a fundamently unprofitable situation where the prices received are less than the cost of production, even for the lowest-cost producers.

I am sorry to say that I'm not just making this stuff up out of the air, in a previous life I worked in corporate finance--I think the latest crisis has just highlighted basic problems in our business that mean, long-term, the cow-calf industry is not viable as a stand-alone enterprise without either government support or the support of other income sources.

One more thought, we are all disappointed that the government has not supported domestic packing plants. But who can complain about the general level of government support? I, for one, have received lots of support money for which I am grateful. There is an argument to be made, and should be made by all you free enterprisers, that Canadian citizens would be better off purchasing all their beef internationally instead of spending mega-bucks to keep us all afloat. I haven't heard that argument made by the capitalists on this site but I'm quite sure we're going to hear it from the average Canadian taxpayer if things don't change. And what would be our answer?


kpb

[grassfarmer]

kpb, interesting post with a lot of truths in it. My answer to anyone pushing the case for abandoning agriculture in this country and importing instead because it's "cheaper" would be a question - is it really cheaper?
I would argue that just because they can clear some rainforest in S America and screw producers even harder there to be able to land beef here a few cents cheaper does not necessarily make that a better choice. It disregards the fact of the environmental damage inflicted and the expenditure of fossil fuels to get the stuff here. For society as a whole its real cost might be a damn sight higher.
Someone posted a thread a while back about the practice of airfreighting perishable foodstuffs into this country and indicated that something that contained 8 calories had used 20 calories derived from finite fossil fuel reserves to transport it. We have got to get smarter than this pretty quick.
I think perhaps the real solution to this is to get global consumers to take responsibility for their actions - as an example if they buy the cheapest techno gadget at the big store at an unbelievably low price they share part of the blame for the enslaved children in the 3rd world that put the thing together and the terrible environmental damage done by the ungoverned pollution in those countries. It is called global responsibility, something we all need to learn.
As far as beef is concerned we must assure Canadian consumers that we have their best interests at heart and are responsible global citizens. It's already been tried in the UK by the NBA who had an ad campaign urging people to buy British beef rather than buy South American as that was causing the rainforests to be cut down. The "fair trade coffee" is another example of a similar campaign. Why not have "fair trade Alberta beef?"
Unlike much of Europe, Canada has vast areas of grassland suited to extensive beef production I think there will always be beef production here on a considerable scale. Sustainability of a feedlot system of fattening beef is less likely in my mind. And I guess it is definately "not viable as a stand-alone enterprise without government support" either. Isn't it nothing but a tax fiddle for non farmers?

[kpb]

yes grassfarmer I agree with just about everything you have written. It is ironic that the arguments about agriculture are really the same arguments about globalization in any industry. Is there any difference between establishing a business in Indonesia to make shoes because they can be made at a fraction of a Canadian shoe-making plant then exporting food from, say, Brazil where you can raise a calf for $100 and make money?

There is no difference really and as you said the system is based on screwing the locals to satisfy the consumer lust of North America. This strategy of global economic dominance by multi-nationals to exploit local peoples is not just pathetic, I think it is inherently evil.

Having said all that, I don't think it's going to change, mainly because the producing countries welcome the multi's as a perceived way to elevate themselves and because the few consuming countries have economies and political systems that are based on gross consumption. And the ruling classes will do everything possible to maintain the status quo.

That is why I think that despite our abundant grassland and high-quality cattle, we face an eventual losing battle in producing beef for export or even, eventually, for domestic consumption on a large, economically viable scale (if, indeed, that is possible as a stand-alone enterprise now for reasons already mentioned).

We will not be able to compete against the poorer cattle producers of this world who will take a lower price and be happy about it. I believe that all of our primary prodution industries will eventually be relegated to Third World countries where cheap labour is abundant. Ironically our role as consumers is also assured since these countries need us at least as much as we need them.

Regarding feedlots, I actually think there is a better future for these than for primary calf production for two reasons--firstly there is a higher barrier to entry--most producers do not have the machinery or facilities necessary to feed on a scale large enough to make an economic unit and, secondly and pathetically, the feedlot owners have most of the power (other than the packers) in our industry and therefore get the bulk of the government support payments.


kpb

[cowman]

Well it is a good thing that John Tyson has enough faith in the border staying open to boxed beef, that he will invest $17 million in a plant expansion?
Ralph Klein recently said that he doubts the border will be open, to live cattle, for another two years. So I guess we need the added capacity to get them killed here and the only other ones I see doing anything seems to be Sunterra?
Ralphs advice to cow/calf producers....hunker down and wait it out! It would have been helpful if old Ralph could have seen his way to throwing us that 40% while we were hunkering...but I guess he figured enough was enough?

[cowman]

When I first saw this article I wondered why R-CALF would be so gung ho to have an early ruling? Is it because they think they have it in the bag and will also get a ban on boxed beef?
I saw a recent quote by Stan Eby that said if boxed beef was banned then the CCA would be pushing their "contingency plan"! He wasn't explaing just what that was, but one part of it was to ask the USA to allow Canada to ship cattle/beef to Mexico through the US! Yea right, like that is going to happen?
If R-CALF wins this next go around how long will Canadian beef/cattle be locked out of the American market?
Would anyone hazard a guess at the price of fats if R-CALF gets boxed beef banned? Personally if I owned a feedlot I'd be a wee bit worried!

[whiteface]

kpb your mind and depth perception of economics and business just amazes me. I see a future in the cattle industry that has more people like you actually treating it like a business. Thanks for the posts, have a good day all!

[grassfarmer]

kpb, my biggest argument that beef production will remain here is our land base. The huge populations of the world are in places that don't have the room / weather for extensive beef production. Europe is shutting down agriculture with the exception of some of the former Eastern Block countries, Australasia is about maxed out on production given their fickle weather conditions, Africa is of limited potential as a beef producer.
It really comes down to S America being the one place to expand beef. Japan, Indonesia, India, China all the places with the huge and increasing populations have no room for increasing beef production as well. One thing we can't make more of and that's land!
How much harder is it to get into feedlotting than ranching? By going to somewhere in the province where they still want feedlots a person could buy a half section and feed 2000 head at a time with minimal investment on land but plenty on corrals. How much more expensive is that than trying to buy enough land to run 3-400 cows year round?

[grassfarmer]

grassfarmer it's not as simple as going somewhere that still welcomes feedlots, anyone wanting to commence a feeding operation must make application under the Agricultural Operations Practices Act and meet the requirements of that legislation, one of which is that the land in question must meet with the Municipal Development Plan of the applicable municipality as it relates to land zoning.
You are certainly right on the mark about the available land for raising beef, although that land is going to be in more remote areas as urban developments increase .